FOURTH QUARTER MERGER AND ACQUISITION ACTIVITY IN HEALTH CARE SERVICES ENDS YEAR AT A THREE YEAR LOW According to Irving Levin Associates, Inc.

FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
Phone: (800) 248-1668
Fax: (203) 846-8300
pressreleases@levinassociates.com
FOURTH QUARTER MERGER AND ACQUISITION ACTIVITY IN HEALTH CARE SERVICES ENDS YEAR AT A THREE YEAR LOW According to Irving Levin Associates, Inc.
(January 18, 1999 - New Canaan, Connecticut)—Irving Levin Associates, Inc. has just released the preliminary results of the Firm’s 1998 fourth quarter report on the merger and acquisition market in the health care services industry, available in mid-February.
According to The Health Care Merger & Acquisition Report, there were 206 transactions which were publicly announced during the fourth quarter ended December 31, 1998, down 23.1% from the previous quarter’s 268 deals. The Physician Medical Group, Long-Term Care and Hospital sectors together account for virtually half (49.5%) of all deals transacted. The breakout of transactions by sector and the percentage change from the previous quarter are given in the table below:
SUMMARY OF HEALTH CARE TRANSACTIONS
(By Sector, Number of Transactions, Percentage Change)
Sector
Number of Transactions
Percentage Change
Physician Medical Groups
40
-29.8%
Long-Term Care
35
+12.9%
Hospitals
27
-22.9%
HMOs
18
-5.3%
Laboratories/MRI/Dialysis
15
-21.1%
Psychiatric
14
+27.3%
Rehabilitation
12
+71.4%
Home Health
11
-26.7%
Other
34
-54.1%
Total
206
-23.1%

"This is the lowest level of health care merger and acquisition activity since the end of 1995 and the beginning of 1996, when an average of 200 deals were announced each quarter", said Stephen M. Monroe, a partner at Irving Levin Associates, Inc.
"Different sectors have experienced declines in M&A activity for different reasons," noted Sanford Steever, editor of the Report. "Advanced consolidation in the Laboratory sector, particularly among dialysis providers, has decreased the number of acquisition candidates available. In the Home Health sector, unfavorable changes to the reimbursement protocols have driven many potential acquisition candidates out of business. And in the PPM sector, operational and financial problems have led to a devaluation of companies’ acquisition currency, which has, in turn, spurred the flight of investors from the market."
Deal volume in the HMO sector remains buoyant while the Long-Term Care sector continues its steady rise. "Having wrung most of the excess costs they can out of operations, managed care groups will seek to grow regionally through consolidation," stated Mr. Steever. "Strong demand from an aging population for assisted living facilities and services will keep investors interested in acquiring long-term care operators," added Mr. Monroe.
"As medical costs rise faster than inflation, and as fewer investment dollars chase an increasing demand for health care services, providers and payors will continue to look to mergers and acquisitions as a means of spreading costs and risks over a larger base," observed Mr. Monroe. "We anticipate that these and other factors will generate as many as 900 deals for 1999."
Irving Levin Associates, Inc. is a New Canaan, Connecticut-based research and publishing firm specializing in health care investments. The Firm has 50 years experience in the health care acquisition market. To purchase The Health Care Merger & Acquisition Report, consisting of 12 monthly newsletters and four quarterly supplements, please call (800) 248-1668.
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